An old city law meant to stop brothels has SoulCycle, other gyms sweating

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This Week in Crain's New York: August 10, 2015

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As it pedals toward a $100 million initial public offering, SoulCycle has told potential investors that its surest path to success is opening more exercise studios. But christening a new outpost in the five boroughs is no easy task. Before the fitness firm can cut the ribbon on any location, it must spend several months and tens of thousands of dollars assuring the city of what it is not: a brothel.

And not just SoulCycle. All gyms, spas, martial-arts schools, massage studios and health clubs looking to set up shop in New York City must get something called a physical culture establishment permit, which was created in the late 1970s to stem the rise of seedy massage parlors in Times Square. Today, however, that means companies hoping to expand quickly find themselves mired in red tape and lawyers' fees as they navigate the city's byzantine bureaucracy. The permits require companies to prove they will not have a negative effect on a neighborhood by divulging their business plans, filing applications with a host of agencies and answering questions at a series of public hearings, starting with the local community board. The issue is of particular concern to gym owners. New Yorkers are living healthier, longer lives thanks in part to the popularity of health clubs and heart-thumping workouts. Gyms are a nearly $30 billion business nationwide, and SoulCycle is not the only company capitalizing on that popularity. Budget gym franchise Planet Fitness, which already has more than a dozen locations in the five boroughs, had its initial public offering earlier this month. And New York City-based Blink Fitness, a subsidiary of luxury brand Equinox Fitness, also recently announced that it plans to open 11 more locations, adding to its presence outside central Manhattan. That's not to mention other outfits such as CrossFit, Crunch Fitness and New York Sports Club that have been inking leases around the city at a steady clip. But each location comes with a pricey catch that critics say does little to deter illegal sex establishments.

Byzantine bureaucracy

"This is an idea whose time has passed," said Howard Goldman, a land-use attorney who has written about the ill effects of the permit. “It made sense when it was adopted, but back then the gym industry didn't really exist as it does now.”

The de Blasio administration estimates that the process of obtaining a physical culture establishment permit can take nearly six months and cost up to $50,000 in fees and payments to lawyers. Not only does the city's Department of Investigation run a limited background check on the applicants, but the obscure city agency that processes the applications—called the Board of Standards and Appeals—also takes into account the opinions of neighbors. At several public hearings, they can inveigh against a company in a formal process few businesses outside of bars or liquor stores are subjected to. "Truthfully, it is a real pain," said Bill Miller, vice president of real estate for Blink Fitness. "We are changing people's lives—literally—and you would think the city would want to get with the times, so to speak." It's hard enough for gyms to find a space that meets their needs: ideally large, at street level and near a subway. Zoning further prohibits physical cultural establishments from opening in many low- and mid-rise districts across the city. That means main drags in neighborhoods like Astoria or upper Manhattan are often off-limits. Blink generally tries to identify future locations near transit hubs in order to catch people on their way to and from work. But when the firm took a look at the 145th Street stop on the No. 1 train in Hamilton Heights in Manhattan, for example, only a handful of buildings within a half-mile radius fit the bill. “There are sections in certain markets where there is little to no space available,” Mr. Miller said. Various professions have chipped away at the law since its inception in 1978. A year after it was passed, a group of licensed masseuses sued the city because they were originally lumped in with a group of less--reputable outfits that were barred from obtaining a permit. And in 2013, yoga studios successfully banded together to convince city officials that they did not meet the definition of a physical culture establishment. But now a more substantial change is finally afoot—ironically coming from the same person who helped get the law passed in the first place.

Repeal appeal

On Nov. 8, 1978, Carl Weisbrod, then director of the Midtown Enforcement Project, testified before the City Planning Commission and urged it to adopt the permit, which would bring to an end a moratorium on new health establishments that had been in place for years. By excluding less-desirable businesses from the definition of a physical culture establishment—and then requiring the ones that did meet the requirements to be vetted by the Board of Standards and Appeals—he felt it would make it harder for illicit businesses to operate within the city's borders.

"Zoning has proved to be the most effective tool in closing down houses of prostitution masquerading as massage parlors," he was noted as saying in a commission report. Now Mr. Weisbrod is head of the City Planning Commission and is taking another look at the law he helped create, spurred in part by a report from the Department of Small Business Services earlier this year that said the permits were needlessly burdensome and a hindrance to opening more health facilities (which the city could arguably use more of: More than half of adult New Yorkers are overweight or obese). "Physical culture establishment permitting was very effective in addressing a problem that existed at the time," a City Planning spokeswoman said. "And consequently, we are working with our sister agencies to determine whether it should be eliminated or modified."

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